ExxonMobil and partners rack up over US$50M expenses in eight months

Jul 24, 2023 News

---

Gas-to-Energy project…

Kaieteur News – Esso Exploration and Production Guyana Limited (EEPGL), commonly referred to as ExxonMobil Guyana has already incurred over US$50 million in expenses associated with the Wales Gas-to-Energy (GTE) project.

On November 25, 2022 the Environmental Protection Agency (EPA) granted the company a Permit to undertake the pipeline and Natural Gas Liquids (NGL) plant, associated with the project. The GTE venture also features a 300 megawatt power plant being pursued by the Government of Guyana (GoG).

In the absence of a Final Investment Decision (FID) on the project, Exxon has already expended more than US$50.67 million to prepare for the laying of the pipeline.

The EPA was taken to Court by two citizens who allege a breach in legal process as it relates the granting of the pipeline Permit. The applicants argue that the oil company did not present documents in its application to the regulator for the GTE project which prove it owns the lands through which the pipeline passes. As a result of their belief that the Permit was granted contrary to the requirements of the Environmental Protection Act, they have asked the Court to quash the approval.

For its part, the developer contends that it has the legal right to conduct the project activities. In its defence application, filed on July 13, 2023, Exxon detailed that to date, it has spent in excess of US$50.67 million.

According to the company, “US$31.76 million (was spent) on initial preparation of the plant site, US$8.75 million on construction of a material offloading facility, US$6.34 million on construction of a heavy haul road, US$2.88 million on construction of a site for the pipeline seawall crossing, and US$0.94 million on improvement of West Bank Demerara public roads and bridges.”

Ultimately, Guyanese will repay the costs associated with developing the GTE project. Government has said it expects to spend US$1.7 billion to develop the initiative. While Exxon is funding the pipeline component, estimated at US$1B, government has approached the United States Export Import (US-EXIM) Bank to finance the NGL and power plants.

Guyana will be paying Exxon for 20 years to supply the natural gas to the facility; this will be the mechanism through which the company will be repaid for its investment.

The country will also be saddled with an additional annual debt for 20 years to repay the US loan, once approved.

Although the GTE project remains the single largest financial project ever pursued by the state, it remains shrouded in secrecy. None of the agreements inked between the GoG and Exxon have been made public to date, despite repeated calls by the Opposition and civil society members for same. It was reported that on June 30, 2022 the government inked a Heads of Agreement (HOA) with the Stabroek Block Co-venturers. Kaieteur News understands that this agreement sets out the principles and conditions for the commercial and technical arrangements of the project.

Citizens were adamant that any agreement with the company should be made public before government attaches it signature to avoid the same fate as the lopsided oil contract inked with the company.

Only on Wednesday, the Indian High Commission announced that a US$160M agreement was inked with the Government of Guyana and Kalpataru Projects International Limited (KPIL) to facilitate the transmission lines and substations for the project. No official statement was released by the state in this regard. In fact, the press was not invited to cover the event which was held at the Office of the Prime Minister.

Even though Exxon is yet to make a FID on the project, government has not indicated what measures are being put in place to monitor the oil company’s spending to develop the project.

Vice President Bharrat Jagdeo in the past had made it clear that Exxon’s expenditure for the offshore oil projects are not monitored in real time as the Production Sharing Agreement (PSA) does not allow Guyana a seat at the table.

Jagdeo specifically stated that the absence of a co-management arrangement prevents the country from knowing what costs are being racked up by Exxon early on and to ascertain which amounts are inflated.

Instead, he said that the country would check the expenses after they are submitted by the company to check for discrepancies.

It is so far unclear whether this arrangement will be replicated for the gas deal, or if the administration will be closely monitoring and approving the company’s expenses prior to them being incurred.

---

• costs, expend, ExxonMobil, gas, GTE

---